While many business owners and those doing business with them often take it on faith that their signature is the (or the only) one that’s required, but who is actually allowed to sign for or on behalf of a company?
Before I launch in, as a Phoenix startup attorney, I am aware that it is not always practical to ask for or obtain, say, an LLC’s operating agreement and, frankly, there are probably more “partnerships” that do not have a formal, written partnership agreement than do. Also, if your agreement with, for example, a corporation is for some negligible amount, it probably isn’t worth it for you or your business to bother.
This post is more directed for those of you business owners, or those of you entering into agreements with businesses, where a sizable amount (or some critical business obligation other than money) is at stake.
In figuring out the answer to the question posed, whether as the business owner yourself or someone doing business with the company, it generally boils down to how the company is legally organized.
Who can sign for a Sole Proprietor?
If you are a sole proprietor or operating as a “d/b/a”, then that’s an easy one—you and the company are practically and legally speaking one and the same. Therefore, whether you are coming at this question as the business owner or perhaps a vendor or prospective partner doing business with one, the answer is the business owner and only the business owner can sign on behalf of the company.
Who can sign for a Partnership?
Next, if you are organized as a general partnership, you must look to the partnership agreement itself or, in the absence of one, to the partnership laws of the state in which the transaction is taking place or is to take place (unless the parties have agreed to a different jurisdiction).
However, the analysis is not quite that simple. Partnerships can generally be divided into two types: General and Limited.
Typically, with a General Partnership, either partner can sign on behalf of and bind the partnership to a contract.
With a Limited Partnership, however, it is just the General Partner, and not the Limited Partners, that can sign for and bind the LP. Again, however, to really have any certainty, you must look to what the partnership agreement says.
Who can sign for an LLC?
Similarly with the Partnership scenarios above, if the business is formed as a limited liability company, the ability to sign and agreement on behalf of an LLC may be vested in either a manager, if the LLC is “manager-managed” or with one or more members, if the company has been organized as a “member-managed” LLC.
In either case, it is always prudent to look at the LLC’s operating agreement (sometimes known by other things like “company agreement”) to see which members or managers, as the case may be, have specific authority to sign on behalf of the company and for what specific acts (if any are named), which hopefully includes your transaction.
Who can sign for a Corporation?
Last but not least, if the business is organized as a corporation, this question is usually a bit more straightforward to answer. It is generally a duly authorized officer of the corporation who has been appointed by the corporation’s Board of Directors that is able to sign on behalf of and bind the corporation.
Therefore, whether you are the owner of the corporation seeking to make sure the agreement you’re about to enter into for the corporation is enforceable or, alternatively, an individual or organization on the other side of things, hoping to hold the corporation accountable to the agreement, you will want to make sure that the contract is signed by an officer such as a President or CEO or even Treasurer or Secretary.
Note: In certain cases, lower level employees or agents may bind a corporation, however issues of “apparent authority” are beyond the scope of this question and will be saved for a future post.
As the reader may realize by now, this is a deceptively simple question that, like with many things in law, requires a more thorough examination of the relevant facts to figure out what should be done that will not only be appropriate but also have the best chance of withstanding a legal challenge later.
Ben Bhandhusavee is the Managing Attorney for BHANDLAW, PLLC, a startup, technology, and e-commerce law practice advising founders and management teams on company startup, corporate and technology transactions, e-commerce, as well as Internet privacy concerns. The firm serves corporate and individual clients throughout Arizona, the United States, and internationally. Our offices are conveniently located along the Camelback corridor in Phoenix’s financial district. For more information about our Company Startup practice, feel free to reach out using the contact form on the right or call us at (602) 222-5542 to schedule a meeting. Connect with Ben on LinkedIn or Avvo.